#Depreciation Schedule and Depreciation of Construction Equipment
Depreciation Schedule and Depreciation of Construction Equipment
What are depreciation schedules used for and what should you pay attention to when depreciating construction equipment? You'll find all information on the tax deduction of construction equipment in this article.
Depreciation of Construction Equipment
Construction equipment is considered "depreciable assets". Over time, they lose value through use on the construction site – however, this loss of value often extends over several years: machines are not completely worthless after one year, but rather decrease in value somewhat each year.
Because a machine loses its value over an extended period of time, you cannot claim the acquisition costs of the machine as a tax deduction all at once. Instead, you must deduct them over a longer period of time. This means that a portion of the acquisition costs for the machines is deducted from your income each year, thereby reducing your total taxable income and allowing you to pay correspondingly less in taxes. This type of deduction for value reductions (namely, the machine losing value) is called depreciation.
Depreciation Schedule for Construction Equipment
How much this depreciation amounts to each year depends on two values: first, the acquisition costs of the machine and, second, the useful life. The useful life of a machine indicates how long it can be used and thus over how many years it loses its value. To prevent each company owner from using an arbitrary useful life as the basis for calculation during depreciation, there is what is known as the depreciation schedule.
"Depreciation schedule" refers to the scheduled deduction for wear and tear. The depreciation schedule is issued by the Federal Ministry of Finance and contains the average useful life for machines. Over the time period specified there, you can depreciate a particular machine. Specifically for the construction industry, there is the depreciation schedule for the construction industry sector, which applies to all machines acquired after December 31, 2000.
There you will find, for example, the following useful lives:
- 8 years useful life for mobile cranes
- 4 years useful life for front tippers
- 6 years useful life for construction compressors with internal combustion engines
- 10 years useful life for construction containers
- 8 years useful life for forklifts
Must You Adhere to the Depreciation Schedule When Depreciating Construction Equipment?
The Income Tax Act stipulates that acquisition costs for depreciable assets (such as construction equipment) that have a useful life of more than one year and are not low-value assets must be depreciated over the average useful life from the depreciation schedule. Low-value assets, on the other hand, can be fully depreciated in the year of acquisition – however, the threshold for low-value assets is only 800 euros (excluding sales tax) and therefore typically plays only a minor role for construction equipment.
By the way: For the year in which you acquired the machine, you can make depreciation on a pro-rata basis, meaning you can depreciate 1/12 of the annual amount for each month in which the asset was acquired.
The average useful life in the depreciation schedule does not necessarily have to match the actual lifespan of the machine (from acquisition to disposal). It serves only as a common agreement that everyone follows in tax law and is based on an average empirical value of how long a machine can be used.
Tax Deduction for Construction Equipment Rental
Unlike the annual partial depreciation following the purchase of new machines, the costs for renting construction equipment can be fully deducted for tax purposes. This is one of the advantages that renting construction equipment offers. More on this in the article: Procurement of Construction Equipment: Should I Buy, Lease, or Rent?
This page was automatically translated from German.